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Lane Keeter, CPA

Partner: Tax Consulting, Estate Planning, and Heber Springs Managing Partner

Congress Passes Retroactive Tax Extenders - Say What?

Well, in case you haven't heard, Congress has done it to us again. Done what, you ask? Pass into law tax provisions that effect last year, that's all!

You may not have even been aware that the federal government shut down briefly early last Friday while, once again, Congress wrestled with a budget deal. At 12:00 am Friday morning, the US government technically ran out of funding and shut down, and remained so for several hours.

Finally, in the wee hours of Friday morning, both houses of Congress passed, and POTUS signed, a relatively bipartisan budget deal that reopened the government, well, at least for another six weeks.

But tucked into that budget deal were tax provisions that few, if any of us, saw coming. These provisions have the effect of extending, retroactive to 2017, several tax deductions and credits that had been allowed to expire at the end of 2016.

Yep, you heard me right, it is 2018, tax returns are being filed (millions of them already filed and processed), and our benevolent legislators suddenly changed the tax code on us effective back to January 1, 2017!

This isn't the first time this stunt has been pulled; this same thing has been done several times during my career as a tax professional. It's just that since none of these extenders were a part of the tax reform bill that became law right before Christmas, most of us tax folks, self-included, gave them up for dead.

But dead they are not, and now we have to deal with the fallout.

As I see it, the provisions that will likely affect the most individual taxpayers are the following:

  • Deduction for mortgage insurance premiums paid;
  • Above-the-line deduction for qualified tuition and related expenses;
  • Credit for nonbusiness energy property;
  • Credit for residential energy property;
  • Credit for new qualified fuel cell motor vehicles;
  • Credit for alternative fuel vehicle refueling property;
  • Credit for 2-wheeled plug-in electric vehicles.

There were many other provisions that were extended, but most of them targeted very specific industries or situations, so are beyond the scope of this article.

If you are affected by one of these provisions, logically you may be asking, what no? The answer depends largely on whether or not you have already filed your tax return.

But regardless of whether you have or haven't already filed, the first thing to know is ñ DON'T GET IN A HURRY! This thing is still so new, that not even the IRS has had a chance to assess its impact and issue much-needed guidance. So, wait and see what they come up with.

If you have filed already, you likely will need to file an amended return to take advantage of the provisions and request the resulting refund. The form that is used for an amended individual return is Form 1040-X. But again, let's wait to make sure this is how the IRS wants to handle this. And be prepared to wait for a while for the refund. Typical IRS processing time on such claims runs about 8 to 12 weeks and sometimes longer.

If you have not already filed and one of these provisions will benefit you, then you need to put your tax return on ice until the IRS has a chance to properly revise the tax forms and/or issue instructions on where and how to report these things. Fortunately, when designing the current forms, the IRS somewhat anticipated this could happen by simply designating many of the places these deductions and credits were previously reported as "reserved for future use". So they could simply "re-activate" those areas of the return with instructions to use them again just as we did in years past. We will just have to see.

Finally, at the risk of sounding self-serving, if you use someone like me to prepare your taxes, please don't take your frustrations about this out on us (pretty please). It is Congress and POTUS that is to blame, so contact them and let them have it (again, pretty please)! I'm just the messenger and we are the ones trying to help you deal with it. Believe me, this creates a lot of havoc for us as well, in the middle of our busiest time of year to boot.

Oh and by the way, these extensions are only for one year, so they don't even apply to the year we are currently in. Could it be the same song, second verse this time next year?

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